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Why Young Americans Don't Want Disability Insurance

Written by: Brian O'Connell05/14/13 - 11:00 AM EDT

NEW YORK ( TheStreet) -- Younger U.S. workers are turning down good opportunities to grab some affordable disability insurance -- and it's not just because they're young and believe they're invincible, at least physically.

While guarding against unexpected illness or physical injury may not be a big priority with younger Americans, that doesn't mean those accidents or illnesses don't or won't happen.

The U.S. Social Security Administration says that about 25% of younger workers (the SSA describes that group as "new entrants to the workforce") face a physical disability that can leave them on the sidelines sitting out work. Without disability insurance, that can mean going without a paycheck, or at least, getting a severely diminished one.

Whether it's through lack of awareness or indifference, younger workers just aren't clamoring for disability insurance, even though the data show they need it.

According to New York-based Guardian Life Insurance , just 35% of young adults have disability life insurance, even though 57% own general life insurance.

Guardian, in its Life and Disability Insurance: What 20- and 30-Somethings Think survey, says that the younger generation does to a large degree believe they are at no big risk for illness or injury. Guardian says that 21% of 20- and 30-somethings who don't have any kind of insurance say they have no "physical risks" that would demand disability insurance.

But the larger reason might have something to do with cost.

Twenty-five percent of those young adults without insurance say the price tag associated with disability insurance is too high -- even though most plans clock in at about 1% of your total annual income for typical group plans. That means a 27-year-old earning $35,000 annually has to pay only $350 per year for disability insurance -- or less than $30 per month. That's a small price to pay, Guardian argues, to defend your income.

"It's difficult to convey the risks associated with disability -- especially to young people, who may feel they're invincible," offers Lawrence Hazzard, a group vice president at Berkshire Life, the disability insurance arm of Guardian. "The word 'disability' leads many to think of catastrophic injuries, but more often disability means having back problems, being temporarily sidelined as you recover from cancer or even battling depression. Being taken out of the workforce for one of these issues -- even for a relatively short time -- can have lifetime consequences without the proper income protection in place."

But younger workers, especially those with pricey college loans to pay off, have to take that all-important first step, Hazzard says.

"Workers need to take the initiative to protect that asset throughout their working lives, especially when you consider the tremendous investments they've made for the sake of gainful employment," he adds.